It’s great if you have started planning for your retirement, but many retirees fall short of their retirement income goals. A Goldman Sachs Asset Management survey found that just 25% of retirees generate enough income to meet their retirement goals.
The findings of the research aren’t surprising, considering over 40% of those still working say that they are behind on their retirement savings. Another reason why many retirees are falling short of their retirement income goal is the jump in life expectancy rates. In the U.S., life expectancy rates in the past three decades for men have increased from 70 to 79, while for women it has increased from 77 to 83.
If you are also worried that you will fall short of your retirement goals, you don’t need to be. With a few simple tips, you can make sure that you have enough money in retirement and that your savings won’t run out.
Tips To Make Sure You Have Enough Money In Retirement
Here are some tips that can help ensure that you have enough money in retirement:
If you have not already started saving for your retirement, then you should start today. The earlier you start saving for retirement, the more you will have at your disposal when you retire. This is because your savings will magnify due to the compound interest concept.
See If You Can Downsize Your Lifestyle
By downsizing your lifestyle a bit, you can easily reduce your cost of living. If you do, you will require less money in retirement. A simple way to downsize your lifestyle is to question every expenditure you make, i.e., asking yourself whether you need it or not, or if spending less on an expenditure makes much of a difference to you or not.
Try To Save More
If you have already started saving for your retirement, then try to save a bit more than you usually do. Experts recommend setting aside 15% of your salary toward retirement. However, if you could add 1% or more to this, it could benefit you immensely when you retire. You can consider reducing your present lifestyle to add more to your savings.
Limit Your Withdrawals When You Retire
A major reason why most retirees run out of money quickly is that they withdraw too much. Experts, however, recommend that retirees, on average, should withdraw 3.5% or so when the markets are down, and about 4.5% when the markets are doing well. Again, cutting your lifestyle down a bit could help you add a percent or more to your savings.
Save Money Outside Of Work Plans
In case you don’t have a 401(k) or other retirement savings plan from your employer, there are other options you can use to save for your retirement. In such a scenario, you can contribute to an individual retirement account with pretax money or a Roth IRA with post-tax money. There are, however, some restrictions on such contributions. You can consult your advisor to know more about these restrictions.
Separately, you can also consider investing in dividend-paying stocks or municipal bonds, or any other investment you see fit. The idea is to stay invested so that your money continuously works for you.
Automate Your Savings
You should make your retirement contributions automatic. This will ensure that your retirement portfolio keeps on growing without bothering you every month.
Delay Claiming Social Security Benefits
It is a fact that the longer you wait to claim Social Security retirement benefits, the bigger your monthly checks will be. You can start claiming benefits at age 62, but the benefit amount would be lower. You will receive the full benefits if you claim it at full retirement age (ages 66 through 67). But if you delay claiming the benefits beyond this age, you will be entitled to an increase of up to 8%.
Consider An Annuity
This is one of the best investment products that could help you to have enough money in retirement. An annuity allows you to create a stream of income in retirement in exchange for a lump sum of money upfront. So, an annuity, along with social security, could go a long way in helping you meeting your retirement goals. However, before opting for an annuity, you should ensure that the fees and costs are not unusually high.
Maintain An Emergency Cushion
Whether or not you are planning for retirement, having an emergency fund is always a good idea and could prove a life-saver. Such a backup gives you the flexibility to manage any big unforeseen expenses, such as a car bill, home repair bill or unexpected medical expense.
A good thing is that you can apply the above tips, irrespective of your current stage of life. But, if you’re still working, then the above steps will significantly help you to boost your cash flow after you retire, as well as better the chances of you meeting your retirement goals. Moreover, these are simple steps that can help you have enough money in retirement without having too much impact on your current lifestyle.